The Fed Maintains Its Interest Rates, the Crypto Market Falters

The American Federal Reserve (Fed) has decided to keep its key interest rates at a high level, marking an important step in its current monetary policy. This decision immediately influenced the crypto market, with a notable drop in the price of some assets.

The Fed Stays the Course on High Interest Rates

The Fed announced on Wednesday that its interest rates would remain between 5.25% and 5.5%, a level not seen since 2001. This decision reflects the institution’s caution in the face of current economic uncertainties. “Recent indicators suggest that economic activity has continued at a solid pace,” said Jerome Powell, Fed chairman, during the press conference. He added that job creation had moderated, with the unemployment rate remaining low.

Inflation, though decreasing, remains slightly above the Fed’s 2% target. Powell highlighted the progress made toward this objective while specifying that the monetary policy would remain restrictive until inflation is fully controlled. This caution reflects the Fed’s desire to stabilize the economy without compromising the progress achieved.

Financial markets are speculating on a possible rate cut at the next Fed meeting in September. However, Powell insisted that the decision would be based on upcoming economic data. He stated that the Fed might consider a rate cut if inflation continues to decrease significantly and the labor market remains stable.

Impact on the Crypto Market

After the Fed’s announcement, the cryptocurrency market quickly reacted with marked volatility. Bitcoin, the market leader, recorded a 3.05% drop, falling below the $64,000 threshold. Currently, the crypto asset is trading below this mark.

Ether, the second-largest crypto by market capitalization, also suffered a drop of about 3% following the announcement. Other altcoins, including assets like Binance Coin (BNB) and Cardano (ADA), also experienced notable declines, illustrating a general selling trend in the market.

The long-term implications of the Fed’s decision for the crypto market are complex and nuanced. Traditionally, Fed rate cuts often precede recessions, which could lead investors to withdraw from risky assets such as bitcoin. However, if the Fed starts to lower rates later in the year, it could signal an economic slowdown, encouraging investors to consider crypto assets like bitcoin as a safe haven.